Correlation Between Desert Gold and Granada Gold

Can any of the company-specific risk be diversified away by investing in both Desert Gold and Granada Gold at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Desert Gold and Granada Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Desert Gold Ventures and Granada Gold Mine, you can compare the effects of market volatilities on Desert Gold and Granada Gold and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Desert Gold with a short position of Granada Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desert Gold and Granada Gold.

Diversification Opportunities for Desert Gold and Granada Gold

0.45

Correlation Coefficient

Desert Gold  Granada Gold

Very weak diversification

The 3 months correlation between Desert and Granada is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Desert Gold Ventures and Granada Gold Mine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granada Gold Mine and Desert Gold is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Desert Gold Ventures are associated (or correlated) with Granada Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granada Gold Mine has no effect on the direction of Desert Gold i.e., Desert Gold and Granada Gold go up and down completely randomly.

Pair Corralation between Desert Gold and Granada Gold

Assuming the 90 days horizon Desert Gold is expected to generate 3.5 times less return on investment than Granada Gold. But when comparing it to its historical volatility, Desert Gold Ventures is 1.89 times less risky than Granada Gold. It trades about 0.03 of its potential returns per unit of risk. Granada Gold Mine is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Granada Gold Mine on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Granada Gold Mine or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Desert Gold Ventures  vs.  Granada Gold Mine

Desert Gold Ventures

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Desert Gold Ventures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Desert Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Granada Gold Mine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Granada Gold Mine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Granada Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desert Gold and Granada Gold

The main advantage of trading using opposite Desert Gold and Granada Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desert Gold position performs unexpectedly, Granada Gold can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Granada Gold will offset losses from the drop in Granada Gold's long position.

The idea behind Desert Gold Ventures and Granada Gold Mine pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.